Credit card delinquencies on the upswing

8.25.23 - Credit card delinquencies on the upswing

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Credit card delinquencies are on the upswing - Fox Business

By Megan Henney

A growing number of Americans are falling behind on their monthly credit card payments, a trend that may be a harbinger of economic troubles ahead, according to a new report from Wells Fargo.

Findings from the bank indicate that credit card delinquencies are surging among commercial banks - particularly at small lenders. In fact, late credit card payments at banks that are outside the top 100 in asset size recently surged to a record high.

Those delinquencies raise the pressure on small- and medium-sized banks, which are already grappling with tightening credit conditions in the wake of three major bank failures earlier this year.

"The economy still has a cash cushion, but many consumers are exhausting their credit, while income growth has slowed sharply," the Wells Fargo strategists wrote in the note. "Our outlook remains for a short, moderate recession and then recovery for most of 2024 and likely into 2025."

The dual increase in credit card usage and delinquency rates is particularly concerning because interest rates are astronomically high right now. The average credit card annual percentage rate, or APR, hit a new record of 20.63% last week, according to a Bankrate database that goes back to 1985. The previous record was 19% in July 1991.